Sunday, January 14, 2007

Inflation in Lebanon

A recent article in the Daily Star newspaper reported,

"A survey conducted last month by local advocacy group Consumers Lebanon found a 13.69 percent increase in prices for 159 products on store shelves across the country between January and December 2006."

The price of so many things have increased, and what is alarming is that food staples and family basics are among them. For example, potatoes farmers were very affected by the Harb Tammouz as the war came during the crucial time of planting... as a direct result of that, the price of potatoes is now 2000 L.L./kg up from 750L.L. This really is too much for the incredibly huge number of families in Lebanon living under 1 million L.L./month. Such price increases are not likely to affect families with higher incomes or with incomes that come from outside but these changes are certainly painful to the poor. This is why the Paris III-associated reform plan's VAT increases (for 2008) are seeing so much resistance... the timing couldn't be worse in light of this inflation.

13 comments:

  1. Part of this inflation may be due to the fact that suppliers do not stock items; they order what they need, in the amounts ordered.

    In a context where demand remains constant, this may contribute to pushing up prices.

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  2. I would like to know how the Daily Star got those numbers. I mean with a total lack of statistics in Lebanon, it is very challenging to even compute "inflation". I'm sure that there is inflation, but it seems to me those numbers have to be taken with a grain of salt. As for the VAT increase, I agree it is not the best timing. Here I wonder who's to blame for our economic problems, and knowing that a working economy goes hand in hand with stable politics, I'm very incliced to blame the "opposition" for a lot of our economic woes, not the government.

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  3. It seems pretty obvious for me that the disruption of the logistics chain as well as the energy supplies could have played a role. When infrastructure have been destroyed to the level we have seen in Lebanon by the Israeli Air Force, the price of everything automatically increases. This is coupled to the global situation of energy and raw material prices in the world. But yes, having the opposition in the streets for months can't help either. And the threat of more political violence is obviously a major problem as higher risks create higher prices too.

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  4. Ya hala bi' hab IB! and thanks to the rest for their comments.

    Ib, why do u doubt the dailystar numbers... its simple, they picked 159 products and compared the prices before and after. And really, everyone who does any kind of grocery shopping will tell you this as well.

    On the political side of things... all I will say is that he who raised the debt (with the Syrians?) from 10 billion $ (if not less) in 1991 to 40 billion is not a man I trust to solve the economy especially when we are talking about more than just corruption on an individual or group level but rather a seemingly deliberate attempt to completely bankrupt an entire nation... (I'm not referring to Paris III).

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  5. Arabic Coffee Pot9:05 PM

    Who DO you trust to "[re]solve the economy?"

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  6. Ya coffee man... that decision is not in my hands but my personal preference is for the FPM, Hizb or any professional and respected technocrat to take over the economy portfolio.

    FPM: give them a chance... they are committed, visionary revolutionaries and are bringing in a lot of good ideas.
    Hizb: they're performance with other ministries was well done I would say and their hands are 'clean' in terms of corruption.
    Technocrats: the important thing is the job gets done, so as long as someone who is capable is there go for it.. also for the sake of depoliticizing the whole affair.

    And what would your preference(s) be and why, if you please?

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  7. Arabic Coffee Pot11:20 PM

    I trust Hizballah and the FPM of course!!

    I mean their methods may seem a little unorthodox but look at all the construction jobs Hizballah created in the Fall, i.e. after the summer war! And their management style of Lebanon's ministries is unrivaled! I mean, they first stall and block ministerial appointments and projects, then in a flash! approve those very same projects only to resign before actually signing the decrees they had agreed to.

    You know, it takes a sharp eye, and a sharper mind, to appreciate these innovations of economic management Abu Jaafar and you seem to have the gift!

    The FPM can't even manage their own political survival by the way, so yeah...thats a no to handing them a whole country to manage.

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  8. time will tell my friend... time will tell... you still haven't answered my question though.

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  9. ghassan karam8:19 AM

    The fact that the prices of 159 commodities went up does not an inflation make.

    I have no idea what are the items in question but if most were food items then we must be reminded that humans do not live by bread alone. They need health care, transportation, housing, clothing, and many incidentals. So the question to be asked is "what is the proportion of the typical expenditures by a house hold are spent on these 159 items? Is it 10% or is it 90% . And finally we must also remember that a one time increase in the price level does not qualify as an inflation? It is difficult for private groups to just go ahead and measure inflation, such studies do more harm than good becau=sue more often than not their conclusions are wrong and unreliable.

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  10. Arabic Coffee Pot3:21 PM

    The answer is easy Abu Jaafar. You can't have any kind of proper economic development with armed groups running around the country and plunging us into war whenever they want. Once you have a country properly controlled by a central government, then you can have development. Its not about names, its about policies, and so far, the groups you are backing will only keep on dragging us back into the middle ages, not aid our development.

    PS - I had written more yesterday, but it got deleted...but the above is the jist of it.

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  11. In principle I agree with you ACP... i.e. "Once you have a country properly controlled by a central government, then you can have development."

    Ghassan Karam, here are some of the products as written in the article... click on the link in the post to see more.

    "durable and consumer goods - including food and beverages, transport, telecommunications, and personal care"

    "chicken, bread, gas oil, diesel, and mobile rates"


    Inflation or not, prices are up for a number of reasons.

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  12. ghassan karam7:48 PM

    abu jafaar,
    I do not intend to make a personal crusade out of this issue but I had already read the said article in the DS. Do you really trust a news item by a private group who thinks that 159 commodities are enough to represent a typical basket of goods and services used by the typical Lebanese House Hold? I have no idea what is the current rate of inflation in Lebanon but I am absolutely certain of one thing it ain't properly represented by that very simple and misleading survey that passes for news only in newspapers like the DS. Let me stress that I have no dog in this race but I am totally opposed to the dissemination of any information that is suspect.

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  13. Hi Ghassan, in short I don't see why I shouldn't...ok, tayeb, forget the word inflation. I am not an econmist and understand little of economy jargon... this article claims that prices of many regular household items are up. Not only does this article claim it, but I and many others around me do too. Whether that qualifies as 'inflation' or not is a matter for economists to debate. Now whether this really affects the average Lebanese household; it certainly and most defintely affects the poor families and I can tell you that from personal experience. And I do think that they are not few... so regardless of the crediblity of this article (although I still dont get it why you distrust it so much given that 159 items seems like a good number to me) I, Abu Jaafar, am saying that prices are up and families are being affected.

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